5 Key Signs You Should Downsize Your Life in Retirement

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Retirement can be a period where you live out big dreams like traveling the world or devoting time to hobbies you never had the chance to pursue. But even if you have ideas for lifestyle upgrades, you don’t necessarily need as many physical possessions and space as you did earlier in life. Downsizing to a smaller home, for example, could free up money to enjoy your time in retirement more.

However, Americans are almost evenly split on this issue. A 2024 GOBankingRates survey found that 51% of Americans plan to downsize in retirement, while 49% do not. If you similarly find yourself torn as to whether or not you should downsize in retirement, consider the following key signs that could mean you’d benefit from it.

You’re an Empty Nester

If you no longer have family living with you in retirement, as is the case for many Americans, that could be a prime opportunity to downsize. If you still have a mortgage, for example, you might use your equity to buy a smaller, more affordable home in cash, thereby leaving you with fewer expenses to manage in retirement.

“If you no longer need the space, downsizing can save you money on your mortgage payments, upkeep and utility payments, as well as taxes, insurance, and potential HOA fees you may currently be paying,” said Kim Gattis, senior vice president, manager, financial planning at UMB Bank.

You’re Not Prepared To Age in Place

When considering whether downsizing is right for you, ask yourself questions like how you’d handle medical issues that affect your living requirements, Gattis said.

You might find that downsizing, such as from a multistory house to a ranch home, or to a condo building with accessibility features, works better for you. As it stands, though, too many people overlook whether or not they’re prepared to age in place.

Despite 88% of Americans ages 50 to 80 wanting to live in their homes for as long as possible, according to a University of Michigan poll, 47% have given little to no consideration of what modifications they’d need to make to age in place.

You Plan To Travel More

Another question to ask yourself is whether you plan to travel more in retirement, and would downsizing help pay for that, Gattis said.

If you’re spending more time away from home, it might make more sense to downsize and put that money toward your travels. You can also think of downsizing as more than just moving into a smaller home. There are many ways to downsize and put savings toward the retirement lifestyle you want, such as for more travel.

“Other things to consider downsizing could be large items like vehicles, or your everyday spending and budgeting that you have done throughout your life like cutting subscription services, buying store-brand groceries or turning the thermostat down a few degrees,” Gattis said.

You Want a Second Home

While this may sound contradictory, downsizing can also align with expanding in some areas. For example, you might consider retirement priorities like buying a second home when considering downsizing, Gattis said.

The GOBankingRates survey found that nearly as many respondents ranked climate and proximity to family nearly the same in terms of the most important factors of where to retire. Cost and location were even more important, though climate vastly outweighed other factors like access to quality medical care.

With that in mind, you might be able to get the best of both worlds by buying a second home, such as having a vacation home in a temperate climate and a primary home near family. To afford two homes, though, you might need to downsize. Perhaps you can have a one-floor house as your primary home to age in place, while maybe your vacation home is a condo rather than a big house.

Your Priorities Are Changing

Lastly, if you notice your lifestyle priorities are changing, beyond areas like wanting to travel, that could be a sign to downsize. The most common thing Americans look forward to in retirement is picking up new hobbies, the GOBankingRates survey found.

These hobbies could add new costs, so downsizing areas like your home and vehicles could free up money and reduce the stress of feeling constrained by an overly tight retirement budget.

“You should make an entire new budget for retirement that better represents your income, expenses, debt and other considerations like your retirement goals,” Gattis said. “Do you want to golf weekly now that you are retired? That should be accounted for in your new budget. This new budget may make it easier to see where cuts can be made with things you don’t care as much about.”

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